GCC powers ofconstruction 2012Constructionsector overview
ContentsGCC construction overview      3UAE construction sector        5KSA construction sector       10Qatar construction...
GCC powers of construction 2012                                    CF section                                             ...
GCC construction sector                                        Overview of construction industry• Backed by vast oil-based...
GCC construction sector                                      U.A.E.Macroeconomic data                                     ...
GCC construction sector                                                U.A.E.                                             ...
GCC construction sector                                         U.A.E.                                                Stre...
GCC construction sector                                        U.A.E.U.A.E. construction industry                         ...
GCC construction sector                                            U.A.E.U.A.E. project market     Total value of projects...
GCC construction sector                                      K.S.A.Macroeconomic data                                     ...
GCC construction sector                                                 K.S.A.                                            ...
GCC construction sector                                       K.S.A.                                              Strength...
GCC construction sector                                        K.S.A.K.S.A construction industry                          ...
GCC construction sector                                            K.S.A.K.S.A. project market                            ...
GCC construction sector                                      QatarMacroeconomic data                                      ...
GCC construction sector                                                  Qatar                                            ...
GCC construction sector                                         QatarQatar construction industry                          ...
GCC construction sector                                         QatarQatar project market                                 ...
GCC construction sector                                      KuwaitMacroeconomic data                                     ...
GCC construction sector                                                Kuwait                                             ...
GCC construction sector                                         Kuwait                                                Stre...
GCC construction sector                                          KuwaitKuwait construction industry                       ...
GCC construction sector                                         KuwaitKuwait project market                               ...
GCC construction sector                                      BahrainMacroeconomic data                                    ...
GCC construction sector                                                Bahrain                                            ...
GCC construction sector                                          Bahrain                                                  ...
GCC construction sector                                        BahrainBahrain construction industry                       ...
GCC construction sector                                         Bahrain                                                   ...
GCC construction sector                                      OmanMacroeconomic data                                      2...
GCC construction sector                                                Oman                                               ...
GCC construction sector                                         Oman                                                Streng...
GCC construction sector                                         OmanOman construction industry                            ...
GCC construction sector                                            Oman                                                   ...
About DeloitteDeloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarante...
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2012 gcc poc construction sector overview

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2012 gcc poc construction sector overview

  1. 1. GCC powers ofconstruction 2012Constructionsector overview
  2. 2. ContentsGCC construction overview 3UAE construction sector 5KSA construction sector 10Qatar construction sector 15Kuwait construction sector 20Bahrain construction sector 25Oman construction sector 30
  3. 3. GCC powers of construction 2012 CF section Key characteristicsCountry Overview Capital Area (sq km) CurrencyUAE • The UAE is a federation of seven emirates, of which Abu Dhabi is the largest Abu Dhabi 83,600 • UAE Dirham • After gaining FDI to exploit oil and gas, the UAE has diversified into a prosperous economy Pegged to US$ = 3.675 DirhamSaudi Arabia • KSA is one the largest economies in the world, accounting for c.55% of total GCC GDP Riyadh 2,240,000 • Saudi Riyal • Oil accounts for c.90% of exports and 75% of government revenue, which is being used to facilitate an infrastructure boom Pegged to US$ = 3.75 RiyalQatar • Qatar has one of the highest levels of GDP per capita in the world, driven by oil revenue Doha 11,437 • Qatari Riyal • OBG reports that the current Emir is initiating liberalising changes to steer the economy towards diversification Pegged to US$ = 3.64 RiyalBahrain • The Kingdom of Bahrain is an island country in the Persian Gulf and is relatively diversified away from oil Manama 716 • Bahraini Dinar • There is a major infrastructure overhaul in progress, aiming to cement Bahrain’s place as the gateway to the GCC region Pegged to US$ = 0.376 DinarKuwait • Kuwait is slowly beginning to diversify its economy, with the hope of reducing dependency on oil revenue Kuwait City 17,818 • Kuwaiti Dinar Abandoned $ peg in 2007 Pegged to a currency basket $ = 0.273 DinarOman • Oman is regarded as one of the more conservative and traditional GCC states, where the local citizens are still a majority Muscat 309,500 • Omani Rial • The construction industry is beginning to see benefits from the diversification policies instigated under the Vision 2020 plan Pegged to US$ = 0.3850 Rial GCC powers of construction 2012 • Construction sector overview • 3
  4. 4. GCC construction sector Overview of construction industry• Backed by vast oil-based reserves and government stimulus packages, the economic prospects of the GCC construction contract awards GCC region have remained positive despite ongoing political unrest in the wider Middle East region. USD bn• Efforts to maintain a balanced and diversified economic base have remained the primary focus of the 25,000 regional governments as evidenced by a steady stream of investments into construction and infrastructure developments. 20,000• Construction contracts worth USD 40 billion were awarded to contractors in the first quarter of 2011, 15,000 47 percent of which were in the energy sector. 10,000• Global demand for oil and gas escalated as political unrest caused uncertainty on future supply. 5,000• KSA is the largest economy of the GCC region and is leading investments in the construction sector. Building Energy Infrastructure• Over USD 500 billion investment opportunities in energy, transportation, education, healthcare and other Q1 2010 Q1 2011 critical sectors of economic development.• The UAE is ranked as the second largest market with investments worth USD 9bn allocated to the GCC projects planned or underway as of Sept 6, 2011 buildings, infrastructure and energy sectors in the first quarter of 2011. 35%• Qatar is the fastest growing economy in the GCC region and holds an 8 percent share of the total value UAE of projects. Saudi Arabia Qatar• Backed by vast reserves of natural gas and an expansionary budget concentrated on all round economic Oman development encompassing a wide spectrum of sectors. Bahrain Kuwait 9% 35% 3% 6% 12% Source: MEED GCC powers of construction 2012 • Construction sector overview • 4
  5. 5. GCC construction sector U.A.E.Macroeconomic data 2006 Actual 2007 Actual 2008 Actual 2009 Actual 2010 Estimate 2011 Forecast 2012 Forecast GDP Normal GDP (USD bn) 175.2 206.4 254.4 248.9 269.6 301.3 328.3 Real GDP growth (%) 13 6.2 7.4 (2.7) 2.1 3.1 4.6 Origin of GDP (% real change) Agriculture (4.8) (0.8) 0.2 2 2 2 2 Industry 17.3 6 8.1 (5.6) 2.3 3.3 4.6 Services 7.9 6.9 6.7 1.7 1.8 3 4.8 Population and income Population (m) 5.3 5.9 6.8 1.7 6.7 7 7.3 GDP per head (USD at PPP) 28.7 27.9 26.8 27.3 27.1 27.4 27.9 Fiscal indicators (% of GDP) Government revenue 31.2 30.2 33.2 24.6 24.5 23.5 23.1 Government expenditure 19.9 21.1 19 22 22 21.6 22.2 Government balance 11.3 9.1 14.2 2.6 2.3 1.9 0.9 Net public debt 37.2 41.2 39.4 48.9 44.9 39.3 35.6 Prices and financial indicators Consumer prices (av ; %) 13.5 11.1 12.3 1.6 0.9 1.7 1.5 Leading interest rate (av ; %) 7.9 8 7.3 5.9 5.2 5.5 5.7Source: Economic Intelligence Unit GCC powers of construction 2012 • Construction sector overview • 5
  6. 6. GCC construction sector U.A.E. 2010 2011 Overall ranking 27 25 Government instability/coups Tax regulations Crime and theft Corruption Tax rates Poor public health Inadequate supply of infrastructure Policy instability Inflation Inefficient government bureaucracyPoor work ethic in national labor force Foreign currency regulations Inadequately educated workforce Restrictive labor regulations Access to financing 0 5 10 15 20 25 % responsesSource: The Global Competitiveness Report 2011-2012 GCC powers of construction 2012 • Construction sector overview • 6
  7. 7. GCC construction sector U.A.E. Strengths Opportunities • One of the most liberal trade regimes in the GCC and attracts strong international capital flows • Favorable macroeconomic outlook as oil prices are expected to remain high (by historical standards) • High number of expatriate workers at all levels of the economy, making up for the otherwise small • Economic diversification into gas, tourism, financial services and high-tech industries offers some workforce protection against volatile oil prices • Progressively diversifying economy, minimizing vulnerability to oil price movements • Despite the impact of the 2009 downturn, the tourism and financial sectors still have good growth prospects, driven by domestic and foreign investment • Government-supported infrastructure spending in transport and utilities expected to intensify in line with increasing demand levels • Decline in cement and steel prices in the region reduces the cost of new projects • Clear regulatory environment and governing private investments creates a favorable climate for • Government willingness to allow private participation in infrastructure investment in infrastructure • Becoming a hub for renewables and green tech, with Masdar spearheading new ventures • State-owned utilities (ADEWA, DEWA etc) are willing to take on majority equity stakes in projects and provide government guarantees in order to attract investors Weaknesses Threats • Rising unemployment due to contraction in the construction sector. • Political instability in the Middle East region could affect investor perceptions • Project finance operations are onerous, while the credit markets remain skeptical of Dubai after the • Several high-profile construction projects have been delayed and fear of another property market decline of the real estate market crash could threaten future development • Shortage of power and water in new buildings as rapid growth of the residential and commercial construction sectors has not been matched by an equally rapid growth in local utilities sectorsSource: Business Monitor International GCC powers of construction 2012 • Construction sector overview • 7
  8. 8. GCC construction sector U.A.E.U.A.E. construction industry Estimated construction growth - UAE• According to Business Monitor International (BMI), the UAE’s construction industry value is forecast at 30 8% approximately USD 20bn in FY11, representing a real value annual growth of 3.5% 7% 25• MEED estimates the total value of projects planned or underway in the UAE at USD 623bn 6% 20 5%• In the UAE USD 20bn of contracts have been awarded between Q1 and Q3 of 2011, of which Abu 15 4% Dhabi accounted for 70% 3% - Abu Dhabi is driving this growth with over USD 12bn in awarded contracts, with particular attention 10 2% placed on transport, utilities and social infrastructure 5 1% - The Abu Dhabi government has a long term investment program to upgrade its airports, seaports and public transport system to cater to the growing population 0 0% 2007 2008 2009 2010 2011 2012 2013 2014 2015 - Abu Dhabi announced the construction of a USD 7bn international airport and a new seaport facility at the Khalifa Port and Industrial Zone Construction industry value, USD bn Construction industry, % of GDP - Masdar has secured a USD 615m financing for its Shams 1 concentrated solar power (CSP) project, Source: Business Monitor International which will be one of the world’s largest solar plants - Approximately USD 2bn has been allocated towards an integrated housing project on the outskirts of 35% Share of GCC’s project market the capital to improve the imbalances within the residential market $201 bn Planned investments in infrastructure in the UAE• Dubai accounts for c. 23% of the total value of contracts awarded 30% Dubai’s 2010 budget allocation to infrastructure - Power and utilities will be leading the investment to meet the 6% annual growth in power demand - The Dubai Electricity and Water Authority (DEWA) announced a USD 19bn CAPEX plan from 2012 to $89 bn Total capital investment in 2011 triple power generation capacity to 22 GW in 2017 3.5% (Expected growth in 2011 for UAE’s building sector (residential and non-residential) GCC powers of construction 2012 • Construction sector overview • 8
  9. 9. GCC construction sector U.A.E.U.A.E. project market Total value of projects planned or underway = USD 623 bn (MEED) Project market breakdown - UAE Examples of major projects Value (USD bn) 47% Transport Dubai Metro 7.6 Abu Dhabi International Airport expansion 6.8 Midfield Terminal at Abu Dhabi International Airport 5.4 1% Al Maktoum International Airport 3.3 6% 37% Abu Dhabi-Al Guwaifat highway concession 2.7 9% Energy and utility Masdar City, Abu Dhabi 22 Transport Commercial Hassyan IWPP 8.6 Energy and utilities Healthcare Gas processing facilities, Abu Dhabi 7 Residential Education IGCC plant, Dubai 6 Source: Business Monitor International Shuweihat 2 IWPP 5.6 Oil storage terminal in Fujairah 5.5 Residential Arab Canal Project 11 Abu Dhabi residential housing fund 5.5 Festival City Dubai 4.7 Oqyana development, Dubai World 3.5Source: Business Monitor International GCC powers of construction 2012 • Construction sector overview • 9
  10. 10. GCC construction sector K.S.A.Macroeconomic data 2006 Actual 2007 Actual 2008 Actual 2009 Actual 2010 Estimate 2011 Forecast 2012 Forecast GDP Normal GDP (USD bn) 315.6 356.6 384.9 476.3 375.8 446.4 471.9 Real GDP growth (%) 5.6 3.2 2 4.2 0.6 3.4 3.7 Origin of GDP (% real change) Agriculture 1.2 1.1 1.9 03.7 0.6 0.6 - Industry 6.4 2 (0.2) 4.4 (2.8) 3.1 3.6 Services 5 4.4 4.2 4.3 4 4 4.1 Population and income Population (m) 23.2 24 24.7 25.5 26.3 27.1 27.9 GDP per head (USD at PPP) 21.2 21.8 22.2 22.9 22.6 22.9 23.5 Fiscal indicators (% of GDP) Government revenue 47.7 30.2 44.6 61.6 36.2 41.2 39.3 Government expenditure 29.3 29.4 32.3 29.1 42.3 38.8 38 Government balance 18.4 21 12.2 32.5 (6.1) 2.5 1.2 Net public debt 42.9 30.9 24.7 18.7 22.6 17 16.2 Prices and financial indicators Consumer prices (av ; %) 0.6 2.3 4.1 9.9 5.1 5.7 6 Leading interest rate (av ; %) 3.8 5 4.8 2.9 0.6 0.5 0.8Source: Economic Intelligence Unit GCC powers of construction 2012 • Construction sector overview • 10
  11. 11. GCC construction sector K.S.A. 2010 2011 Overall ranking 17 21 Government instability/coups Poor public health Crime and theft Policy instability Infaltion Corruption Tax regulations Foreign currency regulations Tax rates Poor work ethic in national labor force Inadequate supply of infrastructure Inefficient government bureaucracy Inadequately educated workforce Access to financing Restrictive labor regulations 0 5 10 15 20 25 % responsesSource: The Global Competitiveness Report 2011-2012 GCC powers of construction 2012 • Construction sector overview • 11
  12. 12. GCC construction sector K.S.A. Strengths Opportunities• The recent oil price boom has boosted growth in the non-oil sector and infrastructure is now much • A competitive business environment will make KSA appealing to investors once risk appetite returns improved to global markets• A large and growing local population means solid domestic demand for goods, services and • Slower growth and lower liquidity will bring inflation down domestically, cushioning the impact of infrastructure in spite of the global macroeconomic crisis the consumer slowdown• One of the largest construction industries in the Middle East • Number of large ongoing projects means that many multinational firms have a presence in the country• The Ninth Development Plan for KSA sets out plans to invest USD 385bn in social and economic infrastructure between 2010 and 2014 • Increasing private investment should provide opportunities for large foreign contractors to increase their involvement in the country • As other construction industries in the Gulf stagnate, construction companies looked to KSA for opportunities. Weaknesses Threats• Dependence on oil means growth, exports and government revenue remain highly vulnerable to • Any attacks on oil facilities could lead to a disruption of output, which would be extremely shifts in world oil prices detrimental to the overall economy given the reliance on this sector• The private sector is dependent on expatriate labor, reflecting a shortage of marketable skills among • Perceptions of high security risk deter some investors as well as adding to the costs of insurance nationals and a high unemployment rate among Saudi citizens GCC powers of construction 2012 • Construction sector overview • 12
  13. 13. GCC construction sector K.S.A.K.S.A construction industry Estimated construction growth - KSA• KSA’s construction industry value is forecast at approximately USD 21bn in FY11 35• MEED estimates the value of projects planned or underway in KSA at USD 629bn 30 6% 25 5%• The outlook for the infrastructure sector remains positive and growth is expected to average 4% over the next 4 years, with a project pipeline worth USD 100bn, driven by a growing population and 20 4% increasing demand across the building and infrastructure sectors 15 3%• Under the Ninth Development Plan, the KSA government aims to invest USD 385bn in social and 10 2% economic infrastructure between 2010 and 2014 - 7% will be directed towards housing projects 5 1% - 19% for healthcare, with 117 hospitals and 750 primary care units expected to open by 2015 0 0% - Vocational schools and colleges are expected to be included in the plan 2007 2008 2009 2010 2011 2012 2013 2014 2015 Construction industry value, USD bn Construction industry, % of GDP• In response to the political unrest in the region, the Government announced social benefit packages Source: Business Monitor International totalling USD 130bn - USD 66bn specifically for housing with 500,000 units in the pipeline 3.7 % Year-on-year real construction growth in 2010• A USD 80bn 10-year investment plan for electricity infrastructure is in place to cater to an expanding $30 bn Value of construction projects awarded by the government in 2010 population - Approximately 20GW of electricity capacity are currently under construction with a total value of c. $13 bn Value of awarded contracts during the first quarter of 2011 USD 30bn 4.0 % Average real growth in the construction industry value between 2012 and 2015• Physical infrastructure projects in KSA will continue to drive current economic development to reduce $385 bn Planned investment for KSA between 2010 and 2014 its reliance on the oil industry - In March 2010, KSA’s General Authority for Civil Aviation pledged USD 666m for 34 airports across 1m Housing units planned between 2011 and 2015 the country over the next 4-5 years 200 Number of airports in the country - An estimated USD 2bn worth of road projects are currently under construction - A total of USD 27bn of rail projects under development or at the bidding phase 94.5% Target employment rate among Saudi nationals by 2014 GCC powers of construction 2012 • Construction sector overview • 13
  14. 14. GCC construction sector K.S.A.K.S.A. project market Project market breakdown - KSA Total value of projects planned or underway = USD 629bn (MEED) 45% Examples of major projects Value (USD bn) Transport King Abdulaziz International airport 7.2 Port at King Abdullah Economic City 6 3% Saudi Landbridge Railway 7 4% Al Maktoum International Airport 4.2 21% 5% Energy and utility PP10 and PP11 power plant near Riyad 4.1 10% 12% Rabigh 6, 2,400 MW power plant 3.4 Construction Airports Roads and Ras al Zour water and power plant 2.4 bridges Power plants and Water transmission grids Ports Oil and Gas Shoaiba 3 desalination plant 2.1 Rail pipelines Construction and social infrastructure Source: Business Monitor International Kingdom tower project 30 Jubail refinery scheme 12 King Abdullah Sports City 4Source: Business Monitor International GCC powers of construction 2012 • Construction sector overview • 14
  15. 15. GCC construction sector QatarMacroeconomic data 2006 Actual 2007 Actual 2008 Actual 2009 Actual 2010 Estimate 2011 Forecast 2012 Forecast GDP Normal GDP (USD bn) 60.5 80.8 100.4 96.8 124.7 155.7 179.7 Real GDP growth (%) 12.2 17.3 11.7 9.5 14 15.8 5.9 Origin of GDP (% real change) Agriculture – – 2.5 1.9 1.7 1.5 1.5 Industry 7.2 18.7 10 14.9 20.1 17.9 11.7 Services 23 15 15.4 3 2.5 5.4 3.2 Population and income Population (m) 1.1 1.3 1.6 1.6 1.7 1.8 1.9 GDP per head (USD at PPP) 58.4 59.8 58.7 61.8 66.9 74.3 76.4 Fiscal indicators (% of GDP) Government revenue 40.4 40.6 40.4 34.8 34.5 34 34.7 Government expenditure 31.5 29.3 26.9 27.3 22.4 19.2 17.9 Government balance 8.9 11.4 13.5 7.5 12.1 14.8 16.8 Net public debt 11.8 7.6 5.1 14 10.5 8.3 7.1 Prices and financial indicators Consumer prices (av ; %) 11.3 13.7 13.2 (3.4) 0.1 3.6 4.7 Leading interest rate (av ; %) 7.2 7.4 6.8 7 7.8 6.2 7.3Source: Economic Intelligence Unit GCC powers of construction 2012 • Construction sector overview • 15
  16. 16. GCC construction sector Qatar 2010 2011 Overall ranking 14 17 Corruption Crime and theft Tax rates Government instability/coups Tax regulations Poor work ethic in national labor force Policy instability Poor public health Inefficient government bureaucracy Infaltion Foreign currency regulations Inadequate supply of infrastructure Inadequately educated workforce Access to financing Restrictive labor regulations 0 10 20 30 % responsesSource: The Global Competitiveness Report 2011-2012 GCC powers of construction 2012 • Construction sector overview • 16
  17. 17. GCC construction sector QatarQatar construction industry Estimated construction growth - Qatar• Qatar’s construction industry value is forecast at approximately USD 8bn in FY11 14 9% 8%• MEED estimates the total value of projects planned or underway in Qatar at USD 226bn 12 7% 10 6%• Qatars construction sector is expected to return to real growth in 2011 following two consecutive years 8 5% of contraction 6 4% - The Qatar Statistics Authority reported 14% year-on-year nominal growth for Q4 2010, expected to 3% continue into 2011 and beyond 4 2% 2• Sport has been a key element of the construction industry boom over recent years in the non-oil and gas 1% sector 0 0% 2007 2008 2009 2010 2011 2012 2013 2014 2015 - Hosting the 2022 FIFA World Cup will drive growth for the construction industry with the country expected to invest around USD 60-70bn in hotel, leisure, tourism, sports, recreational and Construction industry value, USD bn Construction industry, % of GDP infrastructure projects Source: Business Monitor International - In 2011, the country will host the Asian Football Confederations Asian Cup for the second time• Qatar’s transport infrastructure is also one of the sectors benefiting from recent investment 5.3% Construction industry % of GDP in 2010 - Qatar plans to invest USD 25bn in the development of rail lines $6.7bn Construction industry value in 2010 - Other major transport infrastructure projects include: the construction of the New Doha International Airport (USD 9bn), a new port (USD 9bn) and the construction of new road networks (USD 20bn) 1.3m Total workforce in 2010• Education is another key area of construction activity 8.4% Forecast average real year-on-year growth of the construction industry to 2015 - The largest construction project currently in the emirate is Qatari Diar’s Lusail development which will $10bn Allocation of 2010/2011 budget to infrastructure include residential housing for more than 200,000 people Spending for the 2022 World Cup including commercial projects and transport $70bn• Qatar is continuing to expand its power sector through the construction of more power plants, which infrastructure will help to combat the power shortages in the country and is also tackling the issue of water demand through developing independent water and power plants (IWPPs) GCC powers of construction 2012 • Construction sector overview • 17
  18. 18. GCC construction sector QatarQatar project market Project market breakdown - Qatar Total value of projects planned or underway = USD 226 bn (MEED) 32% Examples of major projects Value (USD bn) Transport 24% National rail system 7.2 Abu Dhabi - Qatar Causeway 13 1% Doha International Airport 9 3% New Doha Port 9 6% Qatar-Bahrain Causeway 5 14% 9% Energy and utility 11% Mesaieed A IPP 2.3 Rail Power plants and Water Ras Girtas (Ras Laffan) C 2 transmission grids Construction Oil and Gas Airports pipelines GCC Power Grid (first phase) 1.2 Ports Roads and bridges Water desalination plant 1 Source: Business Monitor International Residential Lusail City 14 Heart of Doha 5.5 Musheireb development 5.5 Doha multipurpose complex 1.6Source: Business Monitor International GCC powers of construction 2012 • Construction sector overview • 18
  19. 19. GCC construction sector KuwaitMacroeconomic data 2006 Actual 2007 Actual 2008 Actual 2009 Actual 2010 Estimate 2011 Forecast 2012 Forecast GDP Normal GDP (USD bn) 101.6 114.6 148 109.5 130.9 142.1 151.3 Real GDP growth (%) 5.2 4.4 8.5 (4.6) 3.2 4 5.3 Origin of GDP (% real change) 2 Agriculture (2.0) (8.8) 1 – 1 3.6 1 Industry 3.1 (1.3) 8.2 (9.1) 2.1 4.4 5.1 Services 7.9 11.2 8.8 – 4.2 5.4 5.5 Population and income Population (m) 3.2 3.4 3.4 3.5 3.6 3.7 3.9 GDP per head (USD at PPP) 37.7 38 41.7 39.6 39.9 40.4 41.3 Fiscal indicators (% of GDP) Government revenue 52.5 58.1 52.9 56.9 54.1 52.2 49.7 Government expenditure 28 23 37.8 31 29.2 29.4 29.6 Government balance 24.4 35.1 15.1 25.9 24.9 22.8 20.1 Net public debt 10.1 11.8 9.5 13.1 11.6 11.3 11.3 Prices and financial indicators Consumer prices (av ; %) 3.6 7.5 9 2.1 5.3 4.6 4.1 Leading interest rate (av ; %) 8.6 8.5 7.6 6.2 5.8 5.2 4.3Source: Economic Intelligence Unit GCC powers of construction 2012 • Construction sector overview • 19
  20. 20. GCC construction sector Kuwait 2010 2011 Overall ranking 34 35 Tax regulations Tax rates Poor public health Infaltion Crime and theft Foreign currency regulations Government instability/coupsPoor work ethic in national labor force Inadequate supply of infrastructure Inadequately educated workforce Policy instability Corruption Access to financing Restrictive labor regulations Inefficient government bureaucracy 0 5 10 15 20 25 % responsesSource: The Global Competitiveness Report 2011-2012 GCC powers of construction 2012 • Construction sector overview • 20
  21. 21. GCC construction sector Kuwait Strengths Opportunities • With large oil reserves, Kuwait has a significant cushion to weather current economic difficulties • The government has ample assets in sovereign wealth and reserve funds to keep the economy afloat in spite of lower oil prices • The country has been generating surpluses for the past 11 years and thus has capacity to finance large projects • Improvements in power and transmission systems provide opportunities for more ambitious developments • In the long term, political scrutiny and changes in government may lead to a higher level of openness and lower corruption compared with other GCC and Middle Eastern states • A number of major inter-regional infrastructure projects are being developed in the GCC region • The government has outlined a USD 108bn four-year investment plan, which will include a number of major infrastructure projects Weaknesses Threats • Oil accounts for almost 50% of GDP, more than 80% of government revenues and over 90% of • Weak business environment compared with other GCC members will potentially make Kuwait the total export earnings, with the non-oil economy still relatively underdeveloped slowest member to recover economically • This makes Kuwait highly vulnerable to exogenous shocks, especially in relation to world oil prices • Continuing political disagreement with Iraq and other neighbors may threaten regional stability • Attempts to Kuwaitize private sector employment have met with limited success • Lack of sufficient private investment may result in a period of extended stagnation as investors look elsewhere for returns • Corruption and political instability both threaten the investment environmentSource: Business Monitor International GCC powers of construction 2012 • Construction sector overview • 21
  22. 22. GCC construction sector KuwaitKuwait construction industry Estimated construction growth - Kuwait• Kuwait’s construction industry value is forecast at approximately USD 2.4bn in FY11 3.5 2% 2%• MEED estimates the total value of projects planned or underway in Kuwait at USD 168bn 3 2% 2.5 1%• BMI expects a slow but steady growth with the industry value rising marginally to USD 3.2bn by 2015 1% 2 1%• Last year, a four year USD108bn infrastructure investment package was approved covering power, 1.5 1% water, a metro system, housing, roads and healthcare 1.0 1% - The Partnerships Technical Bureau in Kuwait has been mandated to promote private sector investment 0% 0.5 through Public-Private Partnerships (PPP) and Build Own Operate and Transfer (BOOT) schemes to 0% ensure efficient implementation of the infrastructure investment plan 0 0% 2007 2008 2009 2010 2011 2012 2013 2014 2015 - Additionally, new legislation allowing private companies to hold a stake in Kuwait’s power sector has Construction industry value, USD bn Construction industry, % of GDP been approved Source: Business Monitor International• The social infrastructure sector will play an increasingly critical role in stimulating the country’s wider economic activity $2.4 bn Value of construction industry in FY11• There has been heightened investment in public education with at least USD 5bn of university building 2.5% Expected construction growth in 2011 projects in the planning stages or under construction - Kuwait has the region’s second largest higher-education building program, centered on the USD 3bn $108 bn Infrastructure investment plan Sabah al-Salem university project $7 bn Electricity generation project• Housing and commercial projects represent 50% of the project market underpinned by strong demand $698 m Investment in redeveloping Kuwait International Airport growth - Kuwait plans to construct 80,000 housing units over the next six years $1.8 bn Planned housing projects - Social housing is also a new priority for the Government with plans in place to use PPP structures to deliver low-cost housing• Plans to construct eight public hospitals by 2016 are in place to deal with the heavy pressure placed on the healthcare sector GCC powers of construction 2012 • Construction sector overview • 22
  23. 23. GCC construction sector KuwaitKuwait project market Project market breakdown - Kuwait Total value of projects planned or underway = USD 168bn (MEED) 31% Examples of major projects Value (USD bn) Transport 31% Boubyan Island Port 1.3 Mass Rapid Transit (MRT) 7 4% Sheikh Jaber Al Ahmed Bridge 3.7 4% Subiya Causeway 3.7 Energy and utility 7% Upgrades and expansions for Mina Abdulla and Ahmadi 4 7% 16% refineries Al-Zour IWPP 2.7 Rail Power plants and Airports Thermal power plant and desalination plant – Shuaiba Construction transmission grids Ports 1.3 North Roads and Oil and Gas Water bridges pipelines Residential Source: Business Monitor International College of Engineering & Petroleum, Kuwait University 0.5 Eight new hospitals 8 Al-Zour oil refinery 15Source: Business Monitor International GCC powers of construction 2012 • Construction sector overview • 23
  24. 24. GCC construction sector BahrainMacroeconomic data 2006 Actual 2007 Actual 2008 Actual 2009 Actual 2010 Estimate 2011 Forecast 2012 Forecast GDP Normal GDP (USD bn) 15.9 18.5 22.2 19.3 20.8 21.7 24.1 Real GDP growth (%) 6.7 8.4 6.3 3.1 4.4 4.4 5.2 Origin of GDP (% real change) Agriculture (10.1) 27.6 2.9 4.6 1.2 1.1 1.5 Industry 6.4 6.1 4.5 (3.3) 2.2 1.5 2 Services 7.1 10.9 8.3 9.9 6.4 7.1 7.8 Population and income Population (m) 1 1 1.1 1.1 1.2 1.2 1.3 GDP per head (USD at PPP) 23.3 24.1 24.6 25.6 25.8 26.1 26.6 Fiscal indicators (% of GDP) Government revenue 30.9 29.3 32.1 23.5 29 28.5 26.3 Government expenditure 26.1 26.2 25.6 29.7 28.7 27.5 26.4 Government balance 4.7 3.1 6.6 (6.1) 0.3 1 (0.1) Net public debt 37.1 31.5 28.3 42.4 60.1 56.8 51.6 Prices and financial indicators Consumer prices (av ; %) 2.7 3.4 3.2 2.7 2.5 2.9 3.2 Leading interest rate (av ; %) 8.1 8.4 8.3 8 8.1 8.1 8.4Source: Economic Intelligence Unit GCC powers of construction 2012 • Construction sector overview • 24
  25. 25. GCC construction sector Bahrain 2010 2011 Overall ranking 37 37 Tax regulations Crime and theft Tax rates Poor public health Foreign currency regulations Corruption Infaltion Policy instability Government instability/coups Inadequate supply of infrastructure Inefficient government bureaucracy Inadequately educated workforce Access to financingPoor work ethic in national labor force Restrictive labor regulations 0 5 10 15 20 % responsesSource: The Global Competitiveness Report 2011-2012 GCC powers of construction 2012 • Construction sector overview • 25
  26. 26. GCC construction sector Bahrain Strengths Opportunities • The economy is more diversified than GCC peers • A package of labor market reforms backed by the Economic Development Board should improve productivity and so boost growth • A regional financial hub, with a well-developed banking sector and a growing Islamic finance industry • Signing of the Bahrain-US FTA has opened a huge market for domestic players • Strong government initiative by way of investment in construction projects Weaknesses Threats • Political instability could threaten economic stability and deter international capital flows • Proposals to limit the duration of expatriate work permits could lead to labor shortages in the construction industry, which is reliant on workers from south Asia • Oil price movements remain a source of risk, as exports and services are highly vulnerable to changes in demand in the extremely oil-dependent country • Despite renewed exploration efforts, oil reserves are dwindling and output is expected to fall by the end of the decade • Public finances are only partially transparent, due to the persistence of opaque extra budgetary transactions‘ • Complicated project approval process discourages leading companies from investing in infrastructure projects in BahrainSource: Business Monitor International GCC powers of construction 2012 • Construction sector overview • 26
  27. 27. GCC construction sector BahrainBahrain construction industry Estimated construction growth - Bahrain• Bahrain’s construction industry value is forecast at approximately USD 1.2bn in FY11 1.6 6% 1.4 5%• MEED estimates the total value of projects planned or underway in Bahrain at USD 52bn 1.2 4%• Steady growth of 1.6% was recorded in 2010 and BMI forecast real term growth of 3.2% in 2011 1 0.8 3%• Between 2012 and 2015, growth is expected to remain conservative at 3% - 4% of GDP due to: 0.6 2% - Oversupply in the commercial construction sector 0.4 - Structural constraints in the housing sector 1% 0.2 - The Government’s limited budget for social infrastructure 0 0% 2007 2008 2009 2010 2011 2012 2013 2014 2015• Trade is an integral part of the Bahraini economy and the required transport infrastructure is being developed to support its growth, in particular: Construction industry value, USD bn Construction industry, % of GDP - USD 4.8bn has been committed to the Bahrain International Airport expansion project to triple airport Source: Business Monitor International capacity to 27m passengers per annum - Over USD 4.7bn is dedicated towards 100km of road and bridge projects - Work on the USD 8bn public transport network is expected to start at the end of 2011 and will include 1.6% Year-on-year real construction growth in 2010 light rail transport, monorail, trams and other systems $52 bn Value of construction projects planned or underway in Bahrain• Bahrain intends to invest USD 1.3bn in power and water projects to meet expectations of a 7% annual 4.3% Real year on year capital investment growth (2010 – 2011) growth in electricity consumption - USD 0.85bn has been allocated to building 10 new power stations, expanding 4 existing ones and 5% Annual growth of maritime cargo adding 380km of underground cabling $1.3 bn Planned investment in the energy sector over the forecast period - USD 0.45bn to upgrade the country’s water network 50,0000 Housing units planned between 2010 and 2015• The focus on mid to high-end construction during the boom has led to a deficit of low income housing - Waiting list of 53,000 households, expanding at 4,000 annually 11bn Value of key commercial and industrial construction projects - The government intends to involve both the private sector and international developers to rectify this problem GCC powers of construction 2012 • Construction sector overview • 27
  28. 28. GCC construction sector Bahrain Project market breakdown - Bahrain Total value of projects planned or underway = USD 52bn (MEED) 55% Examples of major projects Value (USD bn) Transport Expansion of Bahrain International Airport 4.8 Bahrain – Qatar Bridge 4.2 Mina Salman Highway Interchange 4.8 5% Energy and utility Al Hidd Power Complex 1.3 8% Al Dur 1 Independent water and power project 1.6 16% 16% Muharraw sewage treatment plant 0.3 Construction and social infrastructure Rail Power plants and Airports Construction transmission grids Ports Durrat Al Bahrain 3 Roads and Oil and Gas Water bridges pipelines Infrastructure development at Amwaj Islands 1.3 Bahrain Financial Harbour 1.3 Source: Business Monitor International Housing units (30,000) 3.2Source: Business Monitor International GCC powers of construction 2012 • Construction sector overview • 28
  29. 29. GCC construction sector OmanMacroeconomic data 2006 Actual 2007 Actual 2008 Actual 2009 Actual 2010 Estimate 2011 Forecast 2012 Forecast GDP Normal GDP (USD bn) 36.8 41.9 60.3 46.1 55.5 61.2 67.2 Real GDP growth (%) 5.5 6.8 12.8 3 4.1 4.3 4.7 Origin of GDP (% real change) 2 Agriculture (4.6) 4.6 0.5 1.5 1.6 1.6 2.6 Industry (1.7) 3.6 11.9 0.3 4.5 4.9 5.3 Services 12.2 9.5 13 3.1 3.8 3.7 4.3 Population and income Population (m) 2.6 2.7 2.9 3.2 3.3 3.4 3.6 GDP per head (USD at PPP) 21.6 22.4 24.7 23.1 23.3 23.8 24.4 Fiscal indicators (% of GDP) Government revenue 35.2 36.7 32.9 38.1 36.1 33.7 34.2 Government expenditure 34.9 36.5 32.6 41.9 34.5 33.3 33.1 Government balance 0.3 0.2 0.4 (3.8) 1.6 0.4 1.1 Net public debt 3.8 3.1 2.5 5.5 3.9 3.5 3.1 Prices and financial indicators Consumer prices (av ; %) N/A N/A N/A N/A N/A N/A N/A Leading interest rate (av ; %) 7.4 7.3 7.1 7.4 7.1 7.3 7.4Source: Economic Intelligence Unit GCC powers of construction 2012 • Construction sector overview • 29
  30. 30. GCC construction sector Oman 2010 2011 Overall ranking 32 34 Crime and theft Poor public health Tax rates Tax regulations Government instability/coups Foreign currency regulations Corruption Policy instability Inadequate supply of infrastructure Infaltion Inefficient government bureaucracy Access to financingPoor work ethic in national labor force Inadequately educated workforce Restrictive labor regulations 0 10 20 30 % responsesSource: The Global Competitiveness Report 2011-2012 GCC powers of construction 2012 • Construction sector overview • 30
  31. 31. GCC construction sector Oman Strengths Opportunities • Government’s strategy to diversify away from oil is well under way and is helping to drive • Investments in advanced oil recovery technology could potentially boost reserves infrastructure and tourism development • Construction is booming around the industrial port of Sohar, though most services depend on a • Government is keen to promote private sector involvement and attract foreign companies healthy oil economy • Macro indicators in 2011 are showing signs of a return to positive growth • Major tourism investments aim to attract visits from the rising numbers of tourists travelling to and within the GCC Weaknesses Threats • At current output levels, known oil reserves will be exhausted within 20 years • Widening price differential between Omans sour-grade crude oil and OPEC producers grades • Hydrocarbons dependence leaves the economy vulnerable to world price shocks • Oman is not a member of OPEC • Country currently does not yet have a rail network and has therefore become over-reliant on the • Lower oil prices will result in less room to maneuver for the Government, and will have negative road network repercussions for consumer spending and investment • Political instabilitySource: Business Monitor International GCC powers of construction 2012 • Construction sector overview • 31
  32. 32. GCC construction sector OmanOman construction industry Estimated construction growth - Oman• Oman’s construction industry value is forecast at approximately USD 3.4bn in FY11 6 8% 7%• MEED estimates the total value of projects planned or underway in Oman at USD 103bn 5 6% 4• Following a slight decline in 2010, the Omani construction industry is showing signs of improvement 5% with an estimated year on year growth of 5.1% in 2011 3 4% 2 3%• Long term growth in the industry is forecasted at 6.3% 2% - The Omani government’s five-year spending plan has assigned USD 78bn to infrastructure investment, 1 1% the majority of which will go towards developing transport and social infrastructure 0 0% 2007 2008 2009 2010 2011 2012 2013 2014 2015• The government is investing heavily in rail, air and sea infrastructure in an effort to diversify modes of transport and encourage tourism Construction industry value, USD bn Construction industry, % of GDP - Plans for the national rail network are moving ahead, with the first phase of the 1,000km track linking Source: Business Monitor International Muscat to the UAE to be complete by 2017 - Over the next five years, 6 new airports are to be constructed throughout the country and expansions of current airports are also expected 5.1% Forecast year-on-year real construction growth in 2011 - Sohar Industrial Port Company is interested in constructing a new port city project at Sohar Port at an $30 bn Value of key infrastructure projects underway or in the pipeline approximate value of USD 12bn 6 New airports planned• The rapidly increasing population is driving demand for energy and the necessary infrastructure. - Key projects in the energy sector represent 61% of total construction projects $8 bn Government announced commercial projects in Q1 2011 - USD 7.9bn will be invested over the next six years in five IWPP projects 1,600 km Length of national rail network once completed• The recent announcement of USD 8bn expenditures on commercial and residential developments 9% Maximum growth of power demand indicates a strengthening market 29 Number of dam projects to be completed in 2011• There has been heightened interest from developers in tourism projects such as luxury hotels and resorts which is attracting both regional and international players GCC powers of construction 2012 • Construction sector overview • 32
  33. 33. GCC construction sector Oman Project market breakdown - Oman Total value of projects planned or underway = USD 103bn (MEED) 34% Examples of major projects Value (USD bn) Transport 22% Muscat International Airport new terminal 1.8 Masirah Island Bridge 1.5 Duqm Port construction contract extension 0.8 5% Coastal road network 1 6% Energy and utility 14% 6% Kish gas field pipeline 12 13% Barka III and Sohar II power projects 1.7 Oil and Gas Airports Construction Sur power plant 1.8 pipelines Roads and Rail Power plants and bridges Water Haya water project 1 transmission grids Ports Construction and social infrastructure Source: Business Monitor International Oman Conference and Exhibition Center, Muscat 1 Iron ore palletising plant expansion 0.7 Sohar oil refinery expansion project 3.2Source: Business Monitor International GCC powers of construction 2012 • Construction sector overview • 33
  34. 34. About DeloitteDeloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of memberfirms, each of which is a legally separate and independent entity. Please see www.deloitte.com/about for a detailed description of the legalstructure of Deloitte Touche Tohmatsu Limited and its member firms.Deloitte provides audit, tax, consulting, and financial advisory services to public and private clients spanning multiple industries. With a globallyconnected network of member firms in more than 150 countries, Deloitte brings world-class capabilities and high-quality service to clients,delivering the insights they need to address their most complex business challenges. Deloittes approximately 182,000 professionals arecommitted to becoming the standard of excellence.Deloittes professionals are unified by a collaborative culture that fosters integrity, outstanding value to markets and clients, commitment to eachother, and strength from cultural diversity. They enjoy an environment of continuous learning, challenging experiences, and enriching careeropportunities. Deloittes professionals are dedicated to strengthening corporate responsibility, building public trust, and making a positive impactin their communities.About Deloitte & Touche (M.E.)Deloitte & Touche (M.E.) is a member firm of Deloitte Touche Tohmatsu Limited (DTTL) and is the first Arab professional services firm establishedin the Middle East region with uninterrupted presence for over 85 years. Deloitte is among the region’s leading professional services firms,providing audit, tax, consulting, and financial advisory services through 26 offices in 15 countries with over 2,500 partners, directors and staff. Itis a Tier 1 Tax advisor in the GCC region (International Tax Review World Tax 2010, 2011 and 2012 Rankings) and was recognized as the 2010Best Consulting Firm of the Year in the Complinet GCC Compliance Awards. In 2011, the firm received the Middle East Training and DevelopmentExcellence Award by the Institute of Chartered Accountants in England and Wales (ICAEW).© Deloitte & Touche (M.E.). All rights reserved. Member of Deloitte Touche Tohmatsu Limited

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